SAN JOSÉ STATE UNIVERSITY
ECONOMICS DEPARTMENT
Thayer Watkins
Economic Surpluses
The Simplistic or Naive View
This treatment of economic surpluses takes the production of a society
as being determined by the resources of land, labor and capital available.
What is left after providing for the maintenance of the resources, the
necessary consumption for labor and maintenance for capital and land, is
considered the surplus. This surplus can go into a number of different
uses, such as:
- luxurious private consumption
- public displays
- public monuments
- unnecesssary military armaments
- cultural creations
- raising of an increasing population
- investment in capital goods
- research and development
Only the last two would generally be considered productive. Raising an
increased population would also be productive in as much as it results in
an increased labor force but it is recognized that
if there is not increased capital and training the increased labor force
may be unproductive and superfluous. Raising a replacement population would
be in the nature of necessary consumption, the same as feeding the current
labor force. Investment in the wrong types of capital goods could also be
a waste of resources.
The productive power of the resources of an economy may also be wasted in
the form of idle resources, as in the Great Depression of the 1930's.
Investment in military armament is a complex matter. Providing for
defense is a necessity. Investment in weapons of aggression may appear to
be productive if it results in conquest. But from the perspective of
human society war destroys resources and wastes production even though
from the viewpoint of the victor it appears to be productive.
The Less Simplistic View
The simplistic view of surpluses is not so much wrong as incomplete. In some
of the unproductive uses of a society's surplus there may be knowledge and
skills gained that are useful for other things. For example, there are many
technological developments that have their origin in armament and weapons
production.
The simplistic view takes production as given but production requires
incentives and some of the required incentives may be luxury goods. Thus
some luxury goods could be necessary for achieving high levels of
efficiency and production. Of course, this is not always the case and the
luxury goods may be produced for an idle, parasitic class which has no
role in production.
The simplistic view would suggest that it is a good thing for an society
to forego unnecessary consumption; i.e., to save. Such saving is thought
to encourage investment in capital goods. But if the investment demand is
not there in a market economy then economic depression and idle resources
result.
The centralized command economies presumed that if enough resources were
diverted into investment growth and prosperity would follow. The experience
was quite different. Much of the investment was wasted as a resulty of
imbalances in the investment program.
- luxurious private consumption
- public displays
- public monuments
- unnecesssary military armaments
- cultural creations
- leisure
- raising of an increasing population
- investment in capital goods
- research and development
|
|
Possible Uses of the Economic Surplus of a Society
HOME PAGE OF Thayer Watkins